aa

22 July, 2011 Bullion Daily
aa
FOR PRIVATE CIRCULATION ONLY 22 July 2011
Gold Silver
MCX India MCX India
Contract Open High Low Close Change Contract Open High Low Close Change
Aug-11 23138 23167 22861 22893 -216 Sep-11 59420 59935 57775 58075 -1104
Oct-11 23438 23460 23177 23205 -196 Dec-11 60700 61065 58909 59203 -1102
Dec-11 23732 23750 23460 23489 -191 Mar-12 62000 62154 60110 60532 -903
Feb-12 23995 24060 23801 23870 -124 May-12 62850 62850 60999 62146 914
COMEX (Most Active) As on 21-Jul COMEX (Most Active) As on 21-Jul
Contract Open High Low Close Change Contract Open High Low Close Change
Aug-11 1601.9 1605.0 1584.9 1587.0 -9.9 Jul-11 4011.0 4037.5 3886.0 3894.7 -61.1
Oct-11 1603.3 1606.0 1586.0 1588.1 -9.9 Sep-11 4022.0 4032.5 3893.5 3896.9 -61.2
Dec-11 1603.9 1606.9 1587.1 1589.1 -9.9 Dec-11 4019.5 4019.5 3896.8 3896.8 -61.0
Feb-12 1603.6 1608.2 1589.9 1590.5 -9.9 Mar-12 3895.6 3895.6 3895.6 3895.6 -60.9
Apr-12 1607.9 1608.0 1590.2 1592.0 -9.9 May-12 3993.0 3993.0 3894.3 3894.3 -60.9
Gold Means Silver Means (Indicative)
London Gold Fixing London Silver Fixing (Gold Forward Rates) (Silver Forward Mid-Rates)
USD GBP EUR USD GBP EUR 1m 2m 3m 6m 12m 1m 2m 3m 6m 12m
AM 1600.5 992.44 1131.1 39.78 24.6087 28.0635 0.26333 0.273 0.285 0.342 0.427 0.16333 0.1517 0.1467 0.085 -0.0367
PM 1601 985.11 1117.2 source:lbma.co.uk
Major Currencies
Highlights
Currency Type Quote % Chg
• COMEX gold trades in a narrow range Friday after 0.6% slide USD Index Spot 74.659 -0.75%
yesterday
EUR USD Spot 1.422 0.42%
• Dip in safe haven demand weighs on gold prices
• The US dollar index trades marginally higher today after 1% USD INR Spot 44.445 -0.09%
slide yesterday USD JPY Spot 78.71 -0.49%
• Asian equity markets trade higher after sharp gains in US
yesterday
• Euro-zone leaders struck a deal on a second bailout package for Greece
• US initial jobless claims rose by 10000 to 418000 in the week ending July 16
• US Philadelphia Fed manufacturing index rose to 3.2 in July from -7.7 a month ago
• US index of leading economic indicators climbed 0.3% in June after 0.2% rise last month
• German flash manufacturing PMI fell to 52.1 in July, from 54.6 June
• Euro zone Composite PMI fell to a 23-month low of 50.8 in July
• Gold holdings with SPDR ETF fell by 3.33 tonnes to 1242.678 tonnes
• Silver holdings with iShares ETF rose by 45.46 tonnes to 9849.17 tonnes
• The spot gold silver ratio stood at 40.43 on Thursday as against 39.92 a day earlier
• Focus today on Euro-zone industrial orders and German IFO business sentiment data
Market Analysis
COMEX gold trades in a narrow range Friday after a 0.6% slide yesterday which marked its third
consecutive decline. Gold has failed to resume its upward momentum after hitting a record high level of
$1610.7/oz earlier this week.
Gold had gained over $100/oz over last few as uncertainty about health of US and Euro-zone economies
Bullion Daily Please See Disclaimer on the Last Page 1
22 July, 2011 Bullion Daily
amid debt problems raised demand for safe haven assets.
Gold has retreated from recent highs as progress in EU and US debt talk sapped demand for safe haven
assets leading to some profit taking.
Profit taking is also evident from drop in ETF holdings. Gold holdings with SPDR ETF fell by 3.33 tonnes to
1242.678 tonnes. This is the second drop in holdings this week.
Optimism in the market is also evident from rise in equity markets. Asian equity markets trade higher
today tracking gains in US markets yesterday. US DJIA index gained 1.2% yesterday.
Optimism rose after EU members took a step forward to deal with the debt problems engulfing regional
economies. EU members agreed on second bailout package for Greece and took steps to reduce the debt
burdens of Greece, Portugal and Ireland.
As per reports, the deal includes a package for Greece amounting to 159 billion euro ($229 billion) in aid,
including official loans and contributions from the private sector
Under the plan, Greece would receive assistance in several ways. Holders of short-term obligations would
be able to swap their notes for debt with longer maturities and backed by high-rated bonds. Meanwhile,
the terms of the aid package from Europe to Greece would be eased, with maturities lengthened to 15
years from 7.5 years, at an interest rate of a quite low 3.5 percent. Lower interest rates and longer
payback terms will be extended to Ireland and Portugal as well.
Meanwhile, French President Nicolas Sarkozy said the EFSF (European Financial Stability Facility) will be
able to buy sovereign debt in the secondary market.
EU members lacked consensus for a second bailout package for Greece and this rattled global markets.
However yesterday’s agreement to rescue Greece and measures to ease pressure on other debt ridden
nations is a step forward and eased come concerns.
However long term problems for the Euro-zone are far from over. Greece lacks capacity to repay its loans
as debt remains high. Meanwhile, rating agencies have said in recent months that a distressed Greek debt
restructuring could be considered a default. Also debt ridden nations are finding it difficult to implement
the austerity measures. In addition to speculation remains high that debt problems may engulf as well.
Meanwhile expectation is high that euro zone's bailout fund, the, will be expanded.
Gold gained over last few days as US policymakers failed to agree on a debt deal. However recent reports
indicate that debt talks are progressing.
The U.S. will reach its maximum legal borrowing limit in early August unless Congress and the White House
can agree to raise it. There is debate about how to attach a long-term deficit-reduction plan to any
increase in the debt ceiling.
Expectations that deal will be reached rose after reports noted that President Barack Obama and House of
Representatives Speaker John Boehner (R., Ohio) were close to agreeing to a $3 trillion budget deal.
However enthusiasm sapped after Speaker John Boehner denied reports a U.S. budget bargain was near.
While optimism has increased that US policymakers will come to a consensus uncertainty is likely to prevail
until the deal is passed. Meanwhile policy markers are taking measures in event of a default which
indicates uncertainty. As per Reuters report, Philadelphia Federal Reserve Bank President Charles Plosser
said that the Fed is actively preparing for the possibility that the United States could default.
Apart from debt concerns, gold is also gaining support from renewed expectations that Fed could consider
additional support for the US economy in case economy worsens. Fed Chairman last week clarified that
that a new stimulus plan is not imminent and that the time had not come yet for additional support and
noted inflation had picked up since late 2010. However weakening outlook for US economy will keep
Bullion Daily Please See Disclaimer on the Last Page 2
22 July, 2011 Bullion Daily
speculation high that additional support is possible.
US economic data released this week has been mixed indicating weakness in the economy. As per the data
released yesterday, US Philadelphia Fed manufacturing index rose more than expectations. On the other
hand weekly jobless claims were higher than expected. Leading indicators data was in line with
expectations.
Meanwhile a Fed official yesterday said yesterday that it U.S. economy does not show signs of sustainable
improvement this quarter, the Federal Reserve should dig into its toolbox to find new ways to help it along.
Overall, gold has eased a bit as progress in debt talks in US and agreement on second bailout for Greece
reduced demand for safe haven asset. However, uncertainty persists until US deal is passed and this will
limit major downside in gold prices. Focus will continue to be on situation in the US and Euro-zone.
Silver- COMEX Silver trades marginally higher Friday after a three day decline. Silver has fallen sharply
over last few days as gold retreated from record high levels and amid choppiness in industrial metals.
Gold has eased as debt talks in US and Euro-zone reduced safe haven demand. Industrial metals remain
choppy as progress over debt deals failed to ease concerns about health of major global economies.
Meanwhile investment interest also remains mixed. Silver holdings with Ishares ETF rose by 45.46 tonnes
yesterday to 9849.17 tonnes. Holdings fell 60.62 tonnes a day earlier.
Outlook
Gold- MCX Gold may note some gains tracking cues from international exchange. COMEX gold has eased a
bit from recent highs as debt talks progressed in Euro-zone and US limiting demand for safe haven asset.
Meanwhile drop in ETF holdings also indicates some profit taking in the market. However a sharp drop in
gold is unlikely as uncertainty prevails about health of US and Euro-zone economies. US policymakers are
yet to agree on raising debt limit and although it is most unlikely that US will not come to an agreement,
uncertainty will persist until the decision is reached. With no major US economic data, focus today will
largely be on trend in currency and equity markets. Continuing optimism that EU and US deal will be
reached could limit upside for gold. Support for MCX Gold Aug. contract is seen at Rs.22775 while
Resistance is seen at Rs.23100.
Silver- MCX Silver may note some gains tracking cues from international exchange however upside may be
limited. COMEX Silver trades higher after sharp fall over last two days. Supporting prices is rangebound
movement in gold after recent fall. However weighing on prices is choppiness in industrial metals. Also
optimism in the market is limiting safe haven demand for gold. Support for MCX Silver Sept contract is
seen at Rs.56800 while Resistance is seen at Rs.59400.
Data and Events due today
• German IFO - Business Climate (JUL)
• Euro-Zone Industrial New Orders (MAY)
Bullion Daily Please See Disclaimer on the Last Page 3
22 July, 2011 Bullion Daily
Faiyaz Hudani Dharmesh Bhatia
Sr. Research Analyst- Spices, Edible Oil Associate Vice-President- Technical Research
faiyaz.hudani@kotakcommodities.com dharmesh.bhatia@kotakcommodities.com
+91-22-66528837 +91-22-66528846
Sudha R. Acharya Amit Sajeja
Research analyst- Edible Oil, Pulses Sr. Research Analyst- Technical Analyst
sudha.acharya@kotakcommodities.com amit.sajeja@kotakcommodities.com
+91-22-66528809 +91-22-66528847
Madhavi Mehta Ajay Baheti
Research analyst- Energy, Bullion Associate Research- Technical Analyst
madhavi.mehta@kotakcommodities.com ajay.baheti@kotakcommodities.com
+91-22-66528857 +91-22-66528845
Priyanka Jhaveri
Research analyst- Base Metals
priyanka.jhaveri@kotakcommodities.com
+91-22-66528848
Disclaimer
This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other person. Persons into
whose possession this document may come are required to observe these restrictions.
This material is for the personal information of the authorized recipient, and we are not soliciting any action based upon it. This report is not to be construed as an offer to seller the
solicitation of an offer to buy any commodity or commodity derivative inane jurisdiction where such an offer or solicitation would be illegal. It is for the general information of clients of
Kotak Commodity Services Limited. It doesn’t constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of
individual clients.
We have reviewed the report, and in so far as it includes current or historical information, it is believed to be reliable though its accuracy or completeness cannot be guaranteed.
Neither Kotak Commodity Services Limited, nor any person connected with it, accepts any liability arising from the use of this document. The recipients of this material should rely on
their own investigations and take their own professional advice.
Price and value of the commodity referred to in this material may go up or down. Past performance is not a guide for future performance. Certain transactions-including those
involving commodity derivatives involve substantial risk and are not suitable for all investors. Reports based on technical analysis centers on studying charts of a commodity’s price
movement and trading volume, as opposed to focusing on a commodity’s fundamentals and as such, may not match with a report on a commodity's fundamentals.
We do not have any information other than information available to general public. The report is based on information from sources like respective industry associations, FICCI,CII,
companies, media and other public sources. Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a
reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. Prospective investors and others
are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. Our proprietary trading may make trading decisions that are
inconsistent with the recommendations expressed herein.
We and our affiliates, officers, directors, and employees world wide may: (a) from time to time, have long or short positions in, and buy or sell the commodities mentioned herein or
(b) be engaged in any other transaction involving such commodities and earn brokerage or other compensation or act as a market maker in the commodity/(ies) discussed herein or
have other potential conflict of interest with respect to any recommendation and related information and opinions.
The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject commodity and no part of his or her
compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
No part of this material may be duplicated in any form and/or redistributed without Kotak Commodity Services Limited’s prior written consent.
Registered Office: Kotak Commodity Services Ltd., Nirlon house, 1stFloor,Dr. Annie Besant Road, Opp. Sasmira, Worli, Mumbai - 25
Bullion Daily Please See Disclaimer on the Last Page 4